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Procedia CIRP 40 (2016) 250 255

13th Global Conference on Sustainable Manufacturing - Decoupling Growth from Resource Use

Business models for sustainability: the case of second-life electric vehicle


batteries
Na Jiaoa,*, Steve Evansa
a
Institute for Manufacturing, University of Cambridge, 17 Charles Babbage Road, Cambridge, CB3 0FS, UK

* Corresponding author. Tel.: +441223766141; fax: +44 1223464217; E-mail address: nj268@cam.ac.uk

Abstract

Repurposing retired electric vehicle (EV) batteries provides a potential way to reduce first-cost hurdle of EVs. Embedded in energy storage
systems for renewables, second-life batteries could make EV technology more sustainable in terms of cleanliness of charging source and
simultaneously alleviating environmental concerns over end-of-life battery disposal. This paper presents business models of different EV
stakeholders that facilitate battery reuse. Based on interviews with different EV sectors, industrial reports and academic literature, we analyze
how battery reuse could facilitate business model innovation for sustainability in the EV industry. Findings emphasize the importance of battery
ownership, inter-industry partnerships and policy support on battery secondary use. The results also suggest the potential of battery reuse as a
linkage between the transport and energy sector, and a catalyst for EV business model reconfiguration.
2016 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
2016 The Authors. Published by Elsevier B.V.
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of the International Scientific Committee of the 13th Global Conference on Sustainable Manufacturing.
Peer-review under responsibility of the International Scientific Committee of the 13th Global Conference on Sustainable Manufacturing
Keywords: Business models; sustainability; innovation; electric vehicles; battery secondary use; energy storage; renewables

1. Introduction stimulate the renaissance of EVs and help it gain a market


foothold. Despite the rapid increase in EV market share
Over the last few decades, global concerns over climate recently, this nascent industry still needs to sustain itself in
change have strengthened the need for sustainable order to have a long-term commercial viability [3]. One of the
development. The transport sector, despite being crucial for major problems that impede EV market penetration is
economic development, has been lagging behind in terms of considered to be the high price of EVs, which is mainly due to
sustainability performance. Emissions from road the expensive batteries. On the other hand, current EVs face
transportation were 18.5% of total EU emissions in 2012 the skepticism as to whether it is really a sustainable
according to the European Environment Agency. The technology or just green washing [4]. The electricity used to
transition to a more sustainable transport sector is thus of great charge EV batteries is mainly supplied by non-renewables
significance in order for tackling the challenges of air such as coal and gas, which merely transfers GHGs emissions
pollution and resource shortage. Technology improvements from transportation to the energy sector. Meanwhile, issues
such as more efficient internal combustion engines (ICE) related to end-of-life (EOL) battery disposal will emerge with
could contribute to certain environmental targets in the short the increasing market share of EVs. Given the current
term, but in the long run, only a zero-emission transport constraints of battery technologies, recapturing the value from
system should prevail [1,2]. EOL batteries could potentially solve the above problems in a
Electric vehicle (EV) constitutes a sustainable innovation fresh way and propel EV as an engine for the transition to a
that is more energy efficient than conventional gasoline more sustainable transport sector.
vehicles and emits no local pollutants. Current policies and Connected via EV charging, the grid operation and
government subsidies in many countries are seeking to management potential of EV batteries have attracted

2212-8271 2016 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of the International Scientific Committee of the 13th Global Conference on Sustainable Manufacturing
doi:10.1016/j.procir.2016.01.114
Na Jiao and Steve Evans / Procedia CIRP 40 (2016) 250 255 251

increasing attention, especially with the interests in efficient 2. Business models for sustainability: secondary use of EV
grid balancing and the integration of renewable energies [5,6]. batteries as a catalyst
The generation and storage of renewables from intermittent
resources such as wind and solar energies are currently 2.1. Business models and sustainability
challenging due to the lack of cost-effective, large-scale
energy storage systems (ESS) [7]. In this respect, reusing Each business enterprise operates under a certain business
spent batteries after their on-board service life provides a model, explicitly or implicitly, that explains the value creation,
promising solution at an inexpensive cost. The integration of value delivery and value capture mechanisms of its business
renewables into power generation also helps EVs reputation [9,10]. Since the advent of the information and
as zero-emission vehicles in terms of charging source. In communication technology (ICT), the term business model
addition to that, repurposing retired EV batteries for secondary has attracted extensive attention from academia [11].
applications postpones their recycling phase that entails costs Although a commonly accepted definition of business model
and inevitable pollution. Extending the battery life also has yet to be reached, there seems to be a convergence in key
contributes to reducing waste and resource exploitation. themes including value proposition, value creation and
Proper scenarios and effective business models for EV battery capture, value network and economic structure.
reuse are crucial so as to commercialize the post-vehicle A review of the literature reveals that the concept of
markets of retired batteries and generate alternative revenue business models often appears to encompass everything
streams which could also contribute to EV price reduction for relevant to a business, from strategy to economic model and
customers. the like [12]. To truly understand business model and improve
Although some new business models are emerging for EVs, or even innovate business models, confusion with other
they are focused on the economic side without integrating popular business terms and the inclusion of redundant aspects
social and environmental dimensions into the core of the should be avoided [11]. In this paper, the author defines
business. Sustainability is still seen as a supplement outside business model as the logic of value exchange between the
the scope of business models, which leads to various forms of focal firm and its stakeholders. Specifically, one core
missing value opportunities [8]. This article investigates the component value proposition, and three implementation
unsustainable issues existed in the current EV industry and components value creation, value network and value capture,
proposes that battery secondary use could provide a potential constitute a business model. A schematic explanation of the
way to promote EV market adoption and improve the business model definition is presented in Figure 1. Value
sustainability performance of EVs through business model proposition, as the pivotal component of a business model,
innovation. The author first reviews literature regarding articulates the underlying logic of value exchange. It answers
business model innovation for sustainability in theory, along the overarching question: what is the value created from an
with practices of the EV industry with a special focus on EV offering (products or/and services) that a firm intends to
battery reuse. Thereafter, case studies with four different EV deliver to its stakeholders and generates profit from it? After
stakeholders involving battery reuse are presented and deciding the value proposition, value is created for targeted
analysed. Findings emphasize the importance of battery customers through key activities using the firms key
ownership, inter-industry partnerships and policy support on resources and capabilities. The value network determines the
battery secondary use. The results also suggest that although position of the focal firm and its partnerships within the value
battery secondary use is not expected to solve the chain. Finally, value is captured by the focal firm and turned
unsustainable issues of EVs at one stroke, it could serve as a into profits through its cost and revenue models, as well as
bridge linking the transport and energy sector, as well as a other sources such as government support.
catalyst for EV business model innovation to achieve To keep competitive advantages, companies need to
sustainable transportation. innovate their business models intelligently, along with

Figure 1. A schematic presentation of business model definition


252 Na Jiao and Steve Evans / Procedia CIRP 40 (2016) 250 255

technology and process innovations [13,14]. Integrating the whole EV. Also, customers may need to pay for battery
concept of sustainability into the core of the business could replacement after the old battery retires, which further
make the business model itself more competitive. Sustainable increases the cost of EVs. Environmentally, current EV
development contributes not only to economic sustainability, system is likely to cause as much pollution as conventional
but also to delivering social and environmental benefits cars, given the electricity sources used to charge EVs (often
equally the triple bottom line (TBL) [15]. However, it is coal and gas currently) and the lack of proper EOL battery
already apparent that the prevailing business models may be disposal management. Considering the above problems, we
inappropriate or even impeditive for the market penetration of find that repurposing EV batteries after their service life in
sustainable innovations [16]. A sustainable technology vehicles could provide a potential way to solve or alleviate
couldnt develop in an unsustainable industry; in other words, those problems.
we couldnt expect a sustainable technology to compete with Typically, an EV battery reaches its end-of-life (EOL), and
the dominant one in the extant market without changing the replacement is recommended, when its remaining capacity is
business logic and system. Business model, as a holistic below 80% of a new one [21]. When a battery fails to meet
innovation concept, should introduce sustainability into the the criteria for automotive service upon its retirement, there is
business logic and take a multi-stakeholder perspective at an still sufficient energy and power capacity left to support less
industry level. This requires reconsideration of the value demanding applications such as load levelling, renewable
proposition, value creation, value network and the economic energy storage and integration, back up power and
model. By repurposing sustainability into the core of the transmission support [3,21,22]. Further, battery reuse could
business, new sources of value could be generated from postpone the recycling phase which entails costs and potential
business model innovation, which itself then becomes the waste. Repurposing EOL batteries for second use increases
competitive advantage [17,18]. their total service life, which slows down the rate of resource
exploitation and waste disposal.
2.2. Secondary use of EV batteries: a catalyst The technical and economic feasibility of EV battery
second use has been discussed by many authors [3,21,2326].
EV technology, which is claimed to be sustainable, holds Private companies and research institutions have initiated
the promise to electrify vehicles and ultimately, achieve a various pilot projects repurposing EOL EV batteries in ESS,
zero-emission transport system. However, several challenges for example, into solar panels and wind farms, residential and
including the high costs compared with conventional cars, the public back up power, load levelling, among other secondary
range anxiety and long charging time still impede the market use applications. There were no major technical barriers found,
penetration of EVs [19]. Also, unsustainable practices are while the economic viability of reuse in practice should be
common in the current EV industry from the economic, social further studied [27]. Few authors to date, however, have
as well as environmental perspectives. This gives rise to the examined EV battery second life from the business model
growing skepticism as to whether EV is really a sustainable perspective. Given the research gap mentioned, this paper
choice or just green-washing [4]. Apart from further aims to investigate how to help EV stakeholders maximize the
advancing battery technologies to achieve cost-effective, value of used EV batteries from a business model perspective
high-performance EV batteries, business model innovation and how EV battery reuse could serve as link between the
which repurposes sustainability at the core of the business is transport and energy sector, as well as a catalyst for business
critical to the diffusion of EVs under the current technological model innovation for sustainability.
constraints. It could also contribute to value creation from
delivering economic, social and environmental benefits for 3. Data and methodology
EV stakeholders. A business model, if designed well, is able
to not only offset the difficulties accompanying immature Qualitative approaches are more commonly used for
technologies but also create more economic value [20]. inductive purposes [28]. Due to the complex and exploratory
From the literature and practice review on the EV industry,
unsustainable issues of current EV system are identified in the
economic, social and environmental aspects. Details of these
issues are presented in Figure 2. From the social perspective,
the most challenging problem is the inconvenience in mobility.
The immaturity in battery technology and underdevelopment
of charging infrastructure have led to such problems as long
charging time and customers range anxiety [19]. Some novel
business models have emerged trying to tackle this problem,
such as battery swapping developed by Better Place and fast
charging promoted by Tesla, which also rely on expensive
infrastructures. Another challenge impeding the public
acceptance of EVs is their higher price compared with
gasoline cars. The commercialization of EVs hinges on much
more advanced batteries with much lower cost. Currently, EV
batteries constitute approximately 1/3 to a half of the cost of a

Figure 2. Unsustainable issues identified in the EV industry


Na Jiao and Steve Evans / Procedia CIRP 40 (2016) 250 255 253

nature of the research context, qualitative case study method is a joint venture between Nissan and Sumitomo that aims to
is adopted to provide a contextual understanding of the explore effective business models for battery reuse. Using
research topic [29]. In this research on the emerging EV repurposed EOL Leaf batteries provided by 4R Energy, a
industry, it is useful to compare multiple case studies to start-up FreeWire Technology launches an innovative
develop theory inductively. Compared with single case study, charging service business model that provides the first
multiple cases enable comparisons that clarify whether an solution to combine EV charging with grid-level energy
emergent finding is simply idiosyncratic to a single case or management by creating a network of grid-smart mobile EV
consistently replicated by several cases[30]. Different cases chargers.
often emphasize complementary aspects of a phenomenon and
allow for comparison among cases. The use of multiple cases 4. Results
here is appropriate in order for more robust, replicable and
generalizable results. Case studies of the four EV stakeholders suggest that
The data for this research was obtained from semi- repurposing EOL EV batteries is not expected to immediately
structured interviews with various EV stakeholders as well as solve the unsustainable problems mentioned above. Rather, it
secondary published sources such as industrial reports and serves as a promising approach to reduce EV cost-hurdle and
documentation. A semi-structured interview lasts for 1h or so. improve the sustainable performance of the technology with
The interviewees are mostly managers/directors of companies joint efforts from other extant or/and emerging stakeholders in
or sectors. Interviews provide a rich source of information and the EV industry. Battery ownership, inter-industry
a comprehensive understanding of the factors that partnerships and government support have been identified as
enable/prohibit battery second use and their implications for three major deciding factors for EOL battery secondary use.
business model innovation. Semi-structured interviews with Those factors, which are also reflected by various EV
open-ended questions allow for new ideas and visions to be business models, could potentially enable or impede the
brought up that might provide the opportunity for identifying viability of post vehicle applications. On the other hand, we
new ways of seeing and understanding the topic at hand. Also, find that considering the case of EV battery reuse may also
they are good complements to the publicly available data. induce business model innovation.
The four cases in this research were selected on the basis
of their innovative business models involving battery second 4.1 Deciding factors for EV battery second use
use and different roles of stakeholder in the EV industry. They
are electric car manufacturer, recycling company, charging From the case studies of the four companies, we have
infrastructure provider and battery second use joint venture observed three common deciding factors for EV battery
(Table 1). A multi-stakeholder perspective increases the second use: battery ownership, inter-industry partnerships and
reliability of data and enriches the source of information that government support. Battery ownership enables the unified
might otherwise be neglected. The data of the EV management of batteries and facilitates the secondary
manufacturer Yinlong Energy (YLE) and the recycling applications of retired batteries on a large scale. Case studies,
company Brunp was collected from semi-structured especially with YLE and Brunp, indicate the control over
interviews while the cases of the charging infrastructure start- battery as a prerequisite for all business cases. YLE sells
up FreeWire Technology and the battery reuse joint venture electric buses to the financial institute, who then rent the EVs
4R Energy are analysed through published sources. YLE is to bus companies. During the 10-year tenancy, YLE provide
basically an OEM aiming to build a closed-loop industrial free maintenance for the rented EVs under the contract. Upon
chain, where it produces from battery materials to electric expiry of the tenancy, YLE will take back the EVs from bus
buses and energy storage systems. Based on a financial companies including the traction batteries. The value
leasing business model, YLE retains the battery ownership proposition for YLE is the affordable electric buses plus
through maintenance service to its customers and EOL reliable services. YLE has control over the whole lifecycle of
contract. Being a state-level recycling enterprise, Brunp is the EV batteries, from manufacturing to vehicle usage to EOL.
committed to the resource recycling of retired batteries and This greatly facilitates their strategies to reuse the retired
scrapped cars, as well as high-end battery materials batteries into the other industrial chain ESS, in that they
production. However, Brunp is now facing challenges to reuse have not only the property but also the battery use profiles
EV batteries because of the lack of battery sources. 4R Energy obtained during maintenance services. Brunp, in contrary,

Table 1. Summary of selected case studies

Company/ Joint venture Role as stakeholder Country Business model


Yinglong Energy (YLE) EV manufacturer China Financial leasing

Brunp EOL vehicle recycle China Battery recycling

FreeWire Charing infrastructure USA Mobile EV charging

4R Energy Battery reuse Japan Commercial energy storage


254 Na Jiao and Steve Evans / Procedia CIRP 40 (2016) 250 255

relies on batteries provided by their customers. With a 10- happen between YLE and the bus company, YLE has access
year tradition of recycling scrapped conventional vehicles and to the electric buses (EV batteries) over the whole battery
batteries from portable electronics, Brunp has established lifecycle through its maintenance services and EOL contract
sound relationships with its customers such as car companies, that indicates their responsibility over EOL batteries. This
battery manufactures and the public. However, Brunp is now business model does not explicitly reflect battery reuse
facing challenges in terms of reusing EV batteries. Unlike strategies, but it implies YLEs control over the battery (or
retired batteries from digital products that are almost useless battery ownership). Besides, the other industrial chain ESS
for further applications, the high value of spent EV batteries provides YLE with capabilities and scenarios to reuse EOL
may make its customers reluctant to give them to Brunp. The batteries. YLEs business model helps retain its battery
lack of battery ownership may put Brunp at an unfavorable ownership through leasing contract and maintenance service
place in the battery second use market. while Brunp highly relies on battery sources from the outside.
Important as battery ownership is, there is currently no Their battery reuse plans are highly contingent on their
explicit regulation or establishment as to who owns the customer relationship built by previous recycling businesses.
battery in the value chain. Different countries and regions Both of the companies are trying to find new value
may have different answers when it comes to Who is opportunities for EOL batteries, either through internal
responsible for EOL EV batteries. Though EOL products capability reinforcement or external partnerships, which is
have long been regarded as a burden for companies to evade, also indicative of the tendency of business model
second-life batteries could, in the future, become a rich stream modification or innovation stimulated by battery second use.
of profit. Thus, it makes a difference that policy makers For start-ups or joint ventures like FreeWire and 4R
clarify the EOL battery ownership and liability. Further, Energy, repurposing EOL batteries could give rise to business
government could offer incentives to support second-life model innovation or even new businesses. 4R Energy, jointly
demonstration efforts and encourage pilot projects in founded by Nissan and Sumitomo to ad hoc commercialize
promising second use applications. Administrative barriers the post-vehicle market of batteries, is exploring various
should be reduced, such as access to the grid with load possible businesses for EOL Leaf batteries. For instance,
levelling tests and peak-valley electricity price spread in Sumitomo has established the worlds first large-scale power
favour of profitable ESS. YLE for example, has indicated that storage system in Osaka utilizing exclusively EOL Nissan
the lack of the residential peak-valley electricity price spread Leaf batteries repurposed by 4R Energy. A prototype system
in China may inhibit the economic viability of EV battery (600kW/400kWh) consists of sixteen retired EV batteries is
reuse in household ESS. In the United States, on the other used to test the soothing effect on the power output from a
hand, FreeWire develops a mobile charger with retired nearby wind farm. The partnership between Nissan and
batteries from the Nissan Leaf utilizing the peak-valley Sumitomo and the establishment of the joint venture thereof
electricity price spread, which could save substantial charging indicate battery second use as a catalyst for business model
costs for customers. innovation and even new businesses. Interestingly, the start-
Given the complex nature of second-life batteries and their up FreeWire utilizes the retired Nissan Leaf batteries
wide potential applications, a multi-stakeholder perspective is repurposed by 4R Energy. Based on a charging service
suggested and inter-industry partnership is identified as a key business model, FreeWire acts as a cost-effective smart buffer
factor for the success of battery reuse. Currently, the vehicle, between EVs and utilities, and creates great value through
charging and grid systems are managed by different agents grid storage, load levelling, and demand response. Taking
from different sectors [31]. The largely uncooperative advantage of the low cost and remaining capacity from retried
relationship between the EV industry and energy sector may Leaf batteries, as well as the partnership with Nissan,
hinder potential profits from battery second use. 4R Energy, a FreeWires innovative business model could have the
joint venture between Nissan and Sumitomo, is providing potential to scale the flexible charging infrastructure,
retired Nissan Leaf batteries for the start-up FreeWire to providing an energy service that benefits both customers and
develop a smart charging network. This first step out of the the grid. The cases of 4R Energy and FreeWire suggest that
industry boundary suggests huge value opportunities for both battery second use could serve as not only a catalyst for
the EV and energy sectors, as well as a potential solution to business model innovation, but also a linkage between
the strategic barriers to battery second use. currently isolated transport and energy sector.

4.2 Interplay between EV battery reuse and business models 5. Discussion

Case studies with incumbent firms YLE and Brunp have This research aims to contribute to the literature on
brought insight into the impact of current business models on business models and sustainability through an empirical
battery reuse strategies. YLE aims to build a closed-loop exploration of battery EOL strategy and the interaction with
industrial chain (from battery manufacturing to EOL business models in the case of EV battery reuse. Although
management) and two strategic industries pure electric some initial findings are observed from the case studies
vehicles (mainly electric buses) and ESS. Based on a financial regarding the deciding factors for battery reuse and their
leasing business model, YLE transfers the financial burden of interplay with business models, this study has several
purchasing expensive electric buses from the bus company to limitations. Firstly, due to the limited EV market share
the third financial institute. Although the transaction does not (limited battery volume for large-scale secondary applications)
Na Jiao and Steve Evans / Procedia CIRP 40 (2016) 250 255 255

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